BT warns of an £80m blow to profits and Global boss goes

Friday 31 October 2008 10:47 BST

Telecoms giant BT issued a shock warning today that its profits will come in some £80 million lower than expected in the year to next March and revealed that it has parted company with the boss of its Global Services division.

Shares in the group plunged 30.5p to 111.6p, or 22%, on the news, their lowest since it was privatised in 1984.

The company said François Barrault had resigned but admitted he will get a full 12 months' pay-off. Last year the 48-year-old Frenchman was paid a total of £1.57 million.

Global Services is the part of BT that supplies communications and IT to large multinational companies and governments. It has expanded rapidly in recent years, sprawling across 176 countries.

Demand for its services, which include outsourcing for big companies, is still very high and revenues are growing at 15% a year. But it had become clear that management, while concentrating on top-line sales growth and developing the brand, has taken its eye off the ball in terms of cost management and pulling revenues through to the bottom line.

BT chief executive Ian Livingston said: "BT is performing in line with or ahead of expectations in all but one of its divisions, so the results in BT Global Services are particularly disappointing. We acknowledge that the performance in this part of the group is unsatisfactory and are committed to taking decisive action to rectify the situation."

Barrault will be replaced by finance director Hanif Lalani, who said: "I am committed to improving profitability and returns for the division while continuing to win new business."

BT said Global services' operating profit will be £120 million for the half-year to September, down from the £200 million analysts had expected. That makes it almost certain the group profits and earnings per share will be less than last year's. BT intends to maintain the first-half dividend at last year's 5.4p and hopes to lift the final payout.

But analysts were sceptical. Stock-broker Killik & Co said: "We would reiterate our view that a safe and progressive dividend yield is one of the key tenets of an investment case in BT. Since this is no longer the case, we would continue to avoid the shares and look elsewhere for income."